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countr Suppose Burundi is open to free trade in the world market for maize. Because of Burundi's small size, the demand for and supply of malze in Burundi do not affect the world price. The followling graph shows the domestic malze market in Burundi. The world price of maize Is Pw -$350 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer's surplus (CS) when the economy is at the free-trade equllibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). 710 Domestic Demand Domestic Supply 670 CS 630 590 E 550 PS 510 w 470 430 390 350 310 3 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Burundi allows International trade in the market for maize, it will import tons of maize. Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundian CORCUmerEpay fora ten of malze le PRICE (Dollars per ton)

countr Suppose Burundi is open to free trade in the world market for maize. Because of Burundi's small size, the demand for and supply of malze in Burundi do not affect the world price. The followling graph shows the domestic malze market in Burundi. The world price of maize Is Pw -$350 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer's surplus (CS) when the economy is at the free-trade equllibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). 710 Domestic Demand Domestic Supply 670 CS 630 590 E 550 PS 510 w 470 430 390 350 310 3 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Burundi allows International trade in the market for maize, it will import tons of maize. Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundian CORCUmerEpay fora ten of malze le PRICE (Dollars per ton)

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
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5. Welfare effects of a tariff in a small còuntry Suppose Burundi is open to free trade in the world market for malze. Because of Burundl's small size, the demand for and supply of malze in Burundi do not affect the world price. The followling graph shows the domestic malze market in Burundi. The world price of malze Is Pw =$350 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer's surplus (CS) when the economy is at the free-trade equllibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). 710 Domestic Demand Domestic Supply 670 CS 630 590 550 PS 510 W 470 430 390 350 310 3 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Burundi allows international trade in the market for maize, it will import tons of maize. Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundian cORCUmers pay for a ten of malze lels and Runindil imnot ons of mair MacBook Air PRICE (Dollars per ton)
Transcribed Image Text:5. Welfare effects of a tariff in a small còuntry Suppose Burundi is open to free trade in the world market for malze. Because of Burundl's small size, the demand for and supply of malze in Burundi do not affect the world price. The followling graph shows the domestic malze market in Burundi. The world price of malze Is Pw =$350 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer's surplus (CS) when the economy is at the free-trade equllibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). 710 Domestic Demand Domestic Supply 670 CS 630 590 550 PS 510 W 470 430 390 350 310 3 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Burundi allows international trade in the market for maize, it will import tons of maize. Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundian cORCUmers pay for a ten of malze lels and Runindil imnot ons of mair MacBook Air PRICE (Dollars per ton)
Now suppose the Burundian government decides to Impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundlan consumers pay for a ton of malze is $ and Burundi will Import tons of malze. Show the effects of the $40 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle (diamond symbols) to show the producers' surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing govemment revenue received from the tariff and the tan triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff. (? 710 Domestic Supply Domestic Demand 670 World Price Plus Tariff 630 590 550 CS 510 470 PS 430 390 Govemment Revenue Pw 350 310 6 . 12 15 18 21 QUANTITY (Thousands of tons of maize) 24 27 30 DWL Complete the following table to summarize your results from the previous two graphs. Under Free Trade Under a Tariff (Dollars) (Dollars) Consumers' Surplus Producers' Surplus Government Revenue Based on your analysis, as a result of the tariff, Burundi's consumers' surplus by producers' surplus v by $ , and the government collects s In revenue. Therefore, the net welfare effect Is a v of PRICE (Dollars per ton)
Transcribed Image Text:Now suppose the Burundian government decides to Impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundlan consumers pay for a ton of malze is $ and Burundi will Import tons of malze. Show the effects of the $40 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle (diamond symbols) to show the producers' surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing govemment revenue received from the tariff and the tan triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff. (? 710 Domestic Supply Domestic Demand 670 World Price Plus Tariff 630 590 550 CS 510 470 PS 430 390 Govemment Revenue Pw 350 310 6 . 12 15 18 21 QUANTITY (Thousands of tons of maize) 24 27 30 DWL Complete the following table to summarize your results from the previous two graphs. Under Free Trade Under a Tariff (Dollars) (Dollars) Consumers' Surplus Producers' Surplus Government Revenue Based on your analysis, as a result of the tariff, Burundi's consumers' surplus by producers' surplus v by $ , and the government collects s In revenue. Therefore, the net welfare effect Is a v of PRICE (Dollars per ton)
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